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CHAPTER 1: YOUR REAL ESTATE CAREER

INTRODUCTION

The real estate industry is one of the largest sectors of the U.S. economy. Almost two trillion dollars worth of new and existing homes are sold each year, according to the National Association of REALTORS (NAR). The term REALTOR is a registered trade name that only may be used by active members of the National Association of REALTORS (NAR), its state and local associations. These real estate transactions provide millions of Americans with jobs and result in hundreds of billions of dollars of economic activity each year. The housing sector accounts for about 22% of the annual gross domestic product (GDP). In short, the real estate industry, increases income flow, creates net worth, and offers consumers and practitioners alike the opportunity to achieve financial success. This huge segment of the economy offers a variety of employment opportunitiesfrom development and finance through home improvements and residential sales.

You have made a good decision to become a part of this vibrant industry. As a licensed salesperson working in a brokerage, you will be in a unique position to help people with their real estate transactions because you have knowledge and experience that most buyers and sellers do not possess. Consumers depend on you, the real estate professional, to guide them through the complex world

California Real Estate Practice, 4th Edition 1



2 California Real Estate Practice

of real estate sales. Knowing that consumers will turn to you to help make their real estate dreams a reality can appear overwhelming.

New real estate salespeople usually have an abundance of questions about a career in real estate, such as How much money can I make?, What is so great about a career in real estate?, Now that I have my license, what else do I need to know?, What does a real estate salesperson do all day?, How do I choose an office?

People commonly refer to a real estate firm as a real estate agency, but the firm is actually a brokerage. The term brokerage generally refers to an activity involving the sale of something through an intermediary who negotiates the transaction for payment. In the case of a real estate brokerage, the sale involves real property, with the broker acting as an agent for a principal, earning a commission at the end when the transaction closes. The purpose of a real estate brokerage is to help people buy and sell real property. A brokerage firm must have a licensed real estate broker who may work alone or with the help of hundreds of salespeople.

The ways a brokerage may be operated, the people you may find working at a real estate brokerage, your role as a salesperson in a brokerage, and the various brokerage activities you will perform will be discussed later in this unit.

Learning Objectives After reading this unit, you should be able to:

recognize the advantages of pursuing a career in real estate.

identify the daily activities of a real estate sales associate.

describe the transition to a career in real estate, including earnings and the employment relationship with the broker.

list the types of brokerages available to a new salesperson.

identify the brokerage employees and their roles.

GETTING STARTED IN REAL ESTATE Many new licensees begin their real estate careers by starting out as a trainee, with a mentor to guide them through their first few transactions as salespeople. A mentor is a person providing quality support, advice, and counseling. Others prefer to start out as an assistant to a successful salesperson, and receive a small salary and perhaps a small commission, based on the sales price of each

3 Unit 1: Your Real Estate Career

transaction. Still others may choose a starting position, usually based on a salary, as an office assistant or transaction coordinator.

Many different real estate career opportunities are available to a licensed real estate salesperson. You may decide to specialize in residential, commercial, or industrial brokerage, or become a mortgage loan agent or leasing agent. However, the majority of new licensees begin as sales trainees in a residential brokerage firm.

Residential property is where the majority of new licensees begin their real estate careers.

As a result, the focus of this book will be on the sale of residential property within a brokerage.

Residential Sales Residential brokerage is the business of helping homeowners sell and home buyers purchase homes. Most new licensees choose this segment of the industry. In order to be successful in this area, a licensee must have knowledge of available inventory and financing options. In addition, the new salesperson must know how to complete all necessary paperwork, and be able to guide the transaction through to a successful close. The better the agent is prepared, the better he or she will be able to facilitate the transaction, saving his or her clients time, trouble, and money. Licensees who choose residential brokerage need to have knowledge of the local economic trends, disclosure requirements, real estate and fair housing laws, and available financing. In addition, they must be willing and able to work weekends and even some evenings. Experienced salespeople can advance in many large firms to sales manager or general manager. A person with a broker license may also open his or her own brokerage office.

Mortgage Loan Agent A mortgage loan agent is in the business of helping borrowers qualify for and get loans to purchase homes. Well-informed buyers get pre-qualified by a lender before looking for a home. Once the home is selected, the loan agent takes information from the borrower and prepares the actual loan application,


which is sent to the lender for processing. Loan agents must have a California real estate salesperson license if they work for a loan brokerage licensed by the California Department of Real Estate.

Commercial/Industrial Sales Licensees interested in income-producing properties such as apartments, office buildings, retail stores, shopping centers, industrial parks, and ware-houses should consider a career in commercial brokerage. Due to the complexity of these transactions, however, most new licensees begin their career in residential brokerage and then move into commercial/industrial as they learn more about the industry. It is important to know about any economic trends because clients will expect their broker to know why a particular property would be a good investment. Even though real estate licensees do not give tax advice, it is also important to understand current income tax regulations because they could affect the buyers return on his or her investment. Just like residential brokers, commercial brokers should have financing sources for the prospective buyer. Sometimes, the new owner will ask the broker to help lease any remaining vacant space and take over ongoing management of the property.

Leasing Agent or Property Manager The main goal of property management is to protect the owners investment in order to produce the highest possible financial return over the longest period of time. Leasing agents usually work for large apartment complexes, showing the apartments to prospective renters. Property managers usually work for real estate firms that manage homes, condominiums, duplexes, and apartments.

Real Estate Appraiser Real estate appraisers determine the value of properties. To become a real estate appraiser, a person must meet education requirements, experience requirements, and pass an examination administered by the California Office of Real Estate Appraisers.

WHAT DO NEW SALESPEOPLE DO? New real estate salespeople wonder what they will be doing all day. Initially, most new licensees go through a training program. Once it is completed, they talk to homeowners to get listings to sell the homeowners property. Salespeople talk to buyers to help them find available properties. Finally, they handle the paperwork necessary to close the transaction.


In the beginning of your career, you will have very little paperwork to complete. You will most likely schedule time to prepare marketing materials, and consider that as part of your administrative duties. However, as you become more involved on the job, you will need to schedule time to follow-up on outstanding requirements from each of your transactions. This time may include making phone calls to buyers, sellers, escrow parties, and other salespeople, and making sure all paperwork is in order. When your business begins to expand, making time for administrative duties will help to keep you caught up on transactions, and allow you to close deals as quickly and smoothly as possible.

Salespeople focus on the following activities in order to produce and maintain a consistent f low of business: training, improving product knowledge, previewing properties, prospecting, obtaining listings, marketing properties, working with buyers, handling paperwork, closing sales, attending sales meetings, and keeping current with market trends. All of these topics will be discussed in further detail as you progress through the book.

Training After passing the state exam and getting your license, you will probably enter one of the new license training programs offered by larger real estate

A brokerage may offer a new salesperson training or a mentoring program.

firms. You may get good, indifferent, or no training, depending on the brokerage. Many real estate brokerages provide sales training, and on the job training, or a combination of both. Sometimes brokers, managers, or mentors accompany new salespeople to their first appointments. Remember, the broker is responsible for everything a salesperson does. He or she does not want anyone making costly mistakes that may affect the reputation of the brokerage or lead to a lawsuit.

Depending on what your brokerage provides, scheduling time for training, seminars, and continuing education should be a weekly priority for you as a real estate salesperson. Take advantage of all training and educational opportunities throughout your career. Even the most accomplished salesperson requires ongoing training to keep his or her skills current.


Mentoring Program

Most new salespeople feel anxious and overwhelmed by the job ahead of them and have no idea where to start. Some brokerage firms give new salespeople a head start by introducing a mentoring program, where a seasoned salesperson will act as a mentor, guiding the inexperienced salesperson through the first few transactions or first few months.

Mentoring develops a new salespersons confidence as well as professional abilities. In addition, the mentor gains personal and professional rewards from the association. Generally, the mentor guides the new salesperson by accompanying him or her on listing appointments, helping to write up offers, and suggesting profitable activities.

A mentor and protg should have a written agreement about the direction of the mentoring. Details such as how often they meet, their goals, the duration of the mentoring relationship, and the compensation agreement should all be in writing. Some brokerage firms pay mentors directly, while in others, experienced salespeople make their own arrangements to mentor new salespeople. Salespeople commonly pay their mentor 40% of their commissions.

Mentors and protgs form strong professional and personal bonds. The challenge of a mentorship is to help a new salesperson become a strong, independent, real estate professional without the salesperson holding on too long to the mentors knowledge and experience.

Learn About the Product Without product knowledge, a real estate salesperson will not be able to have a successful career. Product knowledge for licensees specializing in residential real estate sales includes knowing about architectural styles, housing features, and current inventory of homes that are for sale in the community. Product knowledge is learned by previewing as many new listings as possible. If you, as the salesperson, have been inside most of the homes, you will be able to better present the property to potential buyers.

Prospecting The bottom line for every salesperson is building future business. The process of developing business, through any number of activities, is called prospecting. Prospecting encompasses the activities a salesperson performs in order to seek out potential clients. Past customers, open houses, for-sale-by-owners (FSBOs),


expired listings, social spheres, local business networks, introductory calls, and your neighborhood or area of specialty, are all good places to connect with prospects.

Obtain Listings Salespeople and brokers must have properties to sell. Consequently, to obtain listings, they set appointments with prospective sellers to give presentations that will encourage the seller(s) to sign a listing agreement. A listing agreement is a bilateral contract between the property owner and the broker to place properties for sale with the broker. When listing a property for sale, brokers and salespeople compare the listed property with similar properties that have been recently sold to determine its competitive market value.

Match Prospective Buyers with Homes Before showing properties to potential buyers, salespeople try to pre-qualify the buyers. In this pre-qualifying phase, the salesperson will meet with potential buyers to define the type of home in which the buyer is interested. In addition, the salesperson, working with a lender, will determine how much the buyer(s) can afford to spend. Then, the salesperson prepares a list of properties for sale, including locations and descriptions, that are comparable to the buyers requirements determined in the

pre-qualifying phase.

Real estate salespeople may meet many times with prospective buyers to discuss and visit available properties. Salespeople should identify and emphasize the most pertinent selling points. When meeting with a young family looking for a house, they may emphasize the convenient floor plan, the areas low crime rate, and the close proximity to schools and shopping centers. When meeting with a potential investor, they may point out the tax advantages of owning a rental property and the ease of finding a renter. If price negotiations become necessary, salespeople must carefully follow their clients instructions and may present counteroffers to get the best price. A counteroffer is the rejection of an original purchase offer and the submission of a new and different offer.

Matching people to homes that meet their requirements

is important.


Write Up Purchase Offers Hopefully, prospective buyers will want to make an offer on one of the properties the salesperson has shown them. If so, the salesperson prepares a purchase offer according to the buyers terms and has the buyer sign it. The signed purchase contract is delivered to the listing broker, along with an earnest money deposit. If the seller signs the purchase offer, a contract is made between the buyer and seller.

Once the buyer and seller have signed the purchase contract, the real estate broker or salesperson must be sure that all special terms of the contract are met so that escrow can close. For example, the salesperson must be sure that mandatory disclosures and agreed-upon inspections take place. If the seller agrees to any repairs, the broker or salesperson must be sure the repairs are made. While loan officers, attorneys, or other people may be involved, the real estate salesperson must ensure that all parts of a real estate transaction are completed.

Handle the Paperwork When selling real estate, the salesperson begins the transaction by writing an offer on the property chosen by a buyer and then submitting that offer to the seller for approval. If the seller dislikes the offer, he or she can counter the buyers offer by writing and submitting a counteroffer to the buyer. The process continues until both parties reach an agreement on a final purchase price, or reject the offer altogether.

Close Escrow Once the buyer and seller agree on price and terms, escrow opens. Escrow is the period of time when all parties are held accountable for the terms of the agreement such as disclosures, financing, property inspection, title search, etc. When escrow closes, the new owners receive a deed, the seller receives his or her proceeds, and the real estate brokers receive their commissions.

Attend Meetings Depending on the brokerage you choose, you will need to schedule time for weekly or monthly meetings. Many brokerages hold weekly sales meetings to discuss such items as sales techniques and important upcoming events, and to acknowledge the accomplishments made by salespeople in the brokerage. It is important to attend these meetings to learn the latest information, provide feedback, and show team spirit.



Follow Economic Trends It is important to pay attention to swings in the economy because they affect the employment of real estate brokers and salespeople. During periods of declining economic activity and tight credit, the volume of sales, and the resulting demand for salespeople, falls. The earnings of brokers and salespeople decline during these times, and many work fewer hours or leave this field of employment.

WHY GO INTO RESIDENTIAL REAL ESTATE SALES? Real estate is an attractive and rewarding career. It offers the opportunity to build a secure future for yourself and to help shape the future of your community. A career in real estate also offers real estate salespeople high earning potential, career opportunities, independence, flexible work schedule, and an unlimited inventory.

High Earning Potential Your earning potential as a real estate salesperson is in your own hands, and is not based on a pay scale established by your employer. Have you ever had a job where you worked harder and more diligently than your co-workers did, but they were paid more because they had worked there longer? Well, as a real estate salesperson, your pay is based solely on the results you produce closed transactions. You are in control of your success and your income is limited only by the amount of energy you use to pursue that success. If you are working harder, smarter, and more diligently, you will make more money and see more results than someone who is not. Real estate is the best paying hard work and the worst paying easy work. Think about that statement. It is an important principle to understand if you are interested in a career as a real estate salesperson.

Independence A career in real estate offers independence and freedom to set your own schedule. Real estate salespeople decide how and when they will perform the duties of their job. Performing to your highest potential is an advantage for the individual who does not enjoy sitting at a desk doing the same boring work day after day. For a salesperson in real estate, no two days are exactly alike. You meet different people, make new sales, and discover new beginnings and challenges each day.


Flexible Work Schedule

In the past, many homemakers and retired people were attracted to real estate sales because of the flexible and part-time work schedules that are characteristic of this field. They could enter, leave, and then later re-enter the occupation, depending on the strength of the real estate market, family responsibilities, or personal circumstances. Recently, however, the attractiveness of part-time work has declined as the increasingly complex legal and technological requirements raise the start-up time and costs associated with becoming a salesperson.

Unlimited Inventory One of the unique things about residential real estate sales is that you have access not only to your own listings, or your firms listings, but also to all of the listings in the Multiple Listing Service (MLS). In California, you can sell any house in town due to the Multiple Listing Service (MLS). The Multiple Listing Service (MLS) is a cooperative listing service conducted by a group of brokers, usually members of a real estate association. Salespeople and brokers submit listings to a central bureau. The listings are then entered into a computerized system available for all MLS members to see. The MLS affords salespeople and brokers the ability to help people find the perfect property rather than selling them on a single property.

HOW DOES REAL ESTATE DIFFER FROM OTHER JOBS? All of the reasons for starting a career in real estatepotential high earnings, independence, and flexibilityare the differences from the typical 9 to 5 job. A career as a real estate salesperson is rewarding; offering flexibility, freedom, and the opportunity to build a secure future.

High Potential Earnings Real estate salespeople act as independent contractors. An independent contractor is a person who chooses the method to use in completing the work under contract, and is accountable for the results. Instead of salaries, real estate agents earn commissions when transactions close. A commission is a fee charged by the broker that is based on a percentage of the propertys sales price. The advantage is that you can earn an excellent living if you work hard and work smart. However, a disadvantage of being an independent contractor is that you do not collect a salary and you do not receive your commission until an escrow closes. Commissions on sales are the main source of earnings for real estate salespeople and brokers.

Unit 1: Your Real Estate Career 11

A beginners earnings are often irregular because weeks or months may pass without a sale. A beginner should have enough money to live on for at least six months, or until commissions begin to flow regularly. Since a commission is based on a certain percentage of the sales price, you can give yourself a raise by selling more properties or selling properties that are more expensive. By doing this, you will have a constant cost-of-living increase since the appreciation of real property usually is greater than inflation.

Independence & Flexibility You are responsible for your career, so being a self-starter is essential. Learning to be a self-starter in real estate is especially important for those who have spent most of their life working in an environment where someone else made the decisions and told them what to do. Since you are your own boss, you must decide how to get results.

The successful salesperson knows not only how to work hard, but how to work smart. Working smarter means developing a strategy that will help you complete more tasks in a shorter amount of time. This means planning your day, week, month, and year ahead of time and following that plan to avoid crises, rather than confronting one crisis after another. Working smart, above all else, means setting goals and creating a plan to help you reach those goals.

WHAT IS THE JOB OUTLOOK?

The California housing market is one of the largest in the nation. Every year, California typically gains more new households, but does not build enough new housing units, thus creating a shortfall. This continuing housing shortage will create an ongoing demand for homes.

Employment in this field will come primarily from increased demand for home purchases and rental units. Shifts in the age distribution of the population over the next decade will result in a growing number of retirees and these people will be moving to smaller accommodations, often in quieter, smaller cities, towns,

A beginner in real estate needs to have enough money for at least six months or until

commissions begin producing a steady income.


or retirement communities. At the same time, younger families are expected to move out of apartments or smaller houses to larger accommodations. Real estate sales take place in all areas, but employment is concentrated in large urban areas and in smaller, rapidly growing communities.

In 2011, membership in the California Association of REALTORS (C.A.R.) reached approximately 165,000 members. The California Association of REALTORS (C.A.R.) is one of the largest state trade organizations in the United States. Each year, thousands of real estate agents become new members of C.A.R.

The large number of real estate licensees creates a very competitive industry. If the number of residential transactions is divided by the number of C.A.R. members, the result is nearly three transactions. Since each transaction has two sides (buyer side and seller side), this equates to approximately six transaction sides per member. This is the lowest productivity among C.A.R. members since the mid-1990s.

This lowered productivity has made it difficult for the seasoned brokers and salespeople to earn a living, and even more so for the new licensees in the industry. Studies show that due to the competitive nature of the business, by the fifth year, fewer than one-half of new licensees remain in the real estate field. Not everyone is successful in this highly competitive field. Many beginners become discouraged by their inability to get listings and close a sufficient number of sales. Those who are successful attribute their success to strong determination combined with effective training, mentoring, and marketing.

Will the Internet Make Real Estate Licensees Obsolete?

The Internet has been used extensively in real estate transactions for the past few years. Many people in the business say the Internet has complemented, not diminished, the licensees role in the real estate transaction. Home sellers appreciate the increased visual marketing and instant access to their properties. Both buyers and sellers like the photos, maps, virtual tours, and neighborhood information available online. After researching neighborhoods, properties, financing options, and brokerage offices online, homebuyers choose a real estate licensee to finalize the home-buying process. The Internet speeds up the process because it gives the prospective buyer the information to make a more informed choice. Prospective buyers view the Internet as a tool to help them research the real estate market, not as a replacement for the salespersons expertise in the field.


Opportunities for Real Estate Assistants As mentioned previously, you may want to begin your real estate career as a real estate assistant to a successful salesperson or broker. This will help you gain the experience and knowledge needed to succeed in your own real estate sales career.

Real estate assistants are able to free up a large portion of the

real estate professionals time by handling a major portion of the paperwork. This allows the salesperson to spend more time getting new business that will generate commissions, such as prospecting, following-up on leads, competing for listings, and

showing property. An efficient

salesperson/assistant team offers more service to clients and

Some people obtain career experience and knowledge in real estate as an assistant to a

successful salesperson or broker.

customers than one salesperson working alone.

What Makes A Great Assistant?

Ideally, a real estate assistant should have the business skills of an administrative assistant and the attitude of a partner. An assistant tracks the paperwork through escrow, sets appointments to show property, helps prepare for listing presentations, and oversees advertising. Some successful salespeople only hire an assistant who has a real estate license; others will hire a non-licensee and train that person.

How Much Will You Earn?

Most real estate assistants usually receive a fixed salary. In addition, many receive a percentage or an incentive bonus on each closed transaction. This mix of salary and bonus combines the security of a known income with the incentive of additional income based on performance.

Specialized Training

You can get training and improve your skills by attending the National Association of REALTORS (NAR) two-day, professional assistant course.


The Real Estate Professional Assistantsm (REPAsm) is a quick-start two-day certificate course that introduces you to the business side of real estate. The course covers such topics as listing and sales forms, MLS input forms, types of agency, mandatory disclosures, marketing concepts, and professional ethics.

THE INTERVIEW Remember that choosing a brokerage is a very important step in your real estate career. It is important to take the necessary steps to prepare for your interview. Present yourself well; dress professionally and do not wear heavy cologne or perfume. Be sure to leave early, allowing enough time so that you can arrive ten to fifteen minutes early. If you are going to an area with which you are not familiar, it is a good idea to double check directions before leaving. Turn off your cell phone before you begin the interview.

When considering a brokerage, both you and the broker must be convinced that your association will be mutually beneficial, long lasting, and compatible with regard to both the brokers and your objectives. You must persuade a prospective broker that you have good organizational and communication skills, and are committed to being successful in the real estate profession. In an interview, remember that the employer is not the only one performing an evaluation. You are also evaluating them to see if you would like to work for that particular company. In this business, brokers need you as much as you need them.

What to Ask During the Interview Your success as a new real estate salesperson is largely dependent on your skills, background, motivation, and drive. It is helpful to know which questions to ask to help you determine which brokerage to choose. The answers to these questions will help you discover if you and the broker can work together in a mutually beneficial manner.


Typical Questions to Ask During an Interview

What types of training and/or educational seminars does the brokerage offer? Who pays for the training?

Is there a mentor program? Are any commissions shared?

Does the brokerage offer up-desk time or floor time where phone leads and walk-in customers are handled by the salesperson on duty?

What commission rates do they offer? Is the commission on a sliding scale, with the percentage increasing as more income is brought into the firm?

What membership expenses are required with associations that the brokerage requires salespeople to join? (Associations such as Multiple Listing Service, or California Association of REALTORS.)

What type of advertising does the brokerage use? (Such as yellow pages, Internet, newspaper and magazine ads, etc.) Who pays for the advertisement of the listings brokerage or salesperson? Does the brokerage pay for any portion of personal ads? Is there a marketing/advertising coordinator? Read the real estate ads in the weekend newspaper, or check the Internet to evaluate the advertising efforts made by the brokerage.

Does the brokerage hire a receptionist or coordinators to help with the transactions?

What are the costs associated with signs, flags, business cards, Internet websites, e-mail addresses, and forms? Will the brokerage assist with these costs?

Who pays for long-distance telephone calls, stamps, stationery, photocopies, office supplies, and other business expenses? Does the brokerage charge a flat monthly desk fee or a percentage of certain expenses?

Does the brokerage have computer equipment for all salespeople to use? Is any software pertinent to the real estate profession provided?

What other start-up costs, ongoing expenses, or new salesperson requirements should be expected?

Does the firm carry E&O Insurance for its salespeople? How much does it cost?

How long have the other salespeople been working there and how successful have they been?


CHOOSE THE RIGHT BROKERAGE COMPANY When considering a career in real estate, it is important for you to choose the right real estate brokerage. A real estate brokerage relies heavily on its reputation. A brokerage with a steady history and positive reputation in the community will be able to offer you the resources to become successful and take your career in a positive direction.

Word-of-mouth is a powerful source in every community, and most consumers have heard which real estate companies to avoid and which to embrace. Prospective clients will have formed an opinion of you based on your company. Consider the appearance of the reception area, receptionist, and other associates. The concept of business attire differs with geographic location and the expectations of the clientele. In any event, being clean and polished is always essential.

Both beginning and experienced

real estate professionals have various choices about which type

of office environment they prefer, such as a small independent office, a large franchise, or a national real estate company. Most real estate firms are relatively small. Some larger real estate firms have several hundred salespeople operating out of various branch offices, and others have franchise

agreements with national or regional real estate organizations.

You may find several different types of real estate companies in the area where you will work. After making a list of the real estate offices in your area, narrow the list to only those offices that would best suit your personality and career goals.

The Mode of Operation A licensed real estate broker creates a brokerage to bring together parties who want to make transactions in real estate. The broker who creates the real estate brokerage firm is the broker-owner and sets all policies for the firm. A broker does not have to own a brokerage firm to be in business; they can opt to work for another firm or even work from home. The broker may operate as an independent firm or as a franchise.

The receptionist represents the brokerage. A professional appearance and attitude is

essential to project the appropriate message to the clientele.


Small Independent Firms

Many newly licensed salespeople choose to work in a small independent firm. Small independent firms usually have one or two office locations and offer the greatest amount of flexibility for a new associate. A higher commission split is also possible. The office environment may be more personal, with fewer salespeople and fewer time commitments required of the new associate. Training opportunities are determined by the brokers attitude toward teaching and mentoring new associates until they learn the business. In some cases, the broker is the office manager and is available to new associates at any time. In other agencies, the broker lists and sells alongside the other salespeople, which leaves the new associates to learn the business on their own.

Large Independent Firms

Large independent firms do not have an affiliation with national franchises. Large independent firms are usually owned by private parties or partnerships, and may have many offices in one area. These companies usually operate like franchised companies and offer management opportunities as well.

One advantage of working for a large independent company is that an associate will have the local name recognition of a well-established firm without having to pay a franchise fee. Salespeople who work for franchised companies will have to pay a share of their commissions for the use of the franchises name. In addition, customers may desire the perceived benefit of a local office rather than that of a national franchise.

Franchises

According to the recent National Association of REALTORS Member Profile, over half of all REALTORS are affiliated with a national franchise. A franchise is a business organization (franchisor) that enters into a contract with other businesses (franchisees) for a fee in order to operate under the franchisors name and guidance. Each franchisee is an independent brokerage that is affiliated via the franchises network to other brokerages. The heart of national franchise loyalty lies with its brand name recognition among consumers. For this increased exposure, the franchisee pays an agreed-upon percentage of their profits to the franchisors. Some of the well-known real estate franchises are Century 21, Coldwell Banker, ERA, GMAC, Help-U-Sell, RE/MAX, Realty Executives, Realty World America, Inc., and Red Carpet Real Estate.

Generally, a national franchise real estate company offers the greatest opportunity for training. These national franchises want their salespeople to be successful,


and they understand that training plays a major role in helping their new associates to succeed. By sponsoring classes, the owner of a franchise ensures that the investment of hiring a new salesperson is in their best interest. Although franchised brokers often receive help in training their salespeople and running their offices, they bear the ultimate responsibility for the success or failure of their firm.

Business activities usually have more structure in a national franchise than in an independent company. Some factors a salesperson should think about when considering a national franchise office are sales meetings, training, the availability of floor time (the time period during which salespeople get new leads or customers from ads or walk-in buyers or sellers) or other regularly scheduled events that may be required. Scheduled mandatory events, while beneficial, do tend to interrupt an associates planned activities.

National franchises may also offer to pay for certain business expenses such as business cards, flyer printing, signs, and advertising. National franchises have the ability to buy in bulk and therefore pay lower rates, making it easier to supplement their employees business needs.

The People in the Brokerage In order to be in business, a residential brokerage must have a licensed real estate broker. The brokerage does not have to employ anyone; however, brokers usually make more money when they have licensed salespeople who help get new listings and market existing listings. As the number of sales associates increases, most brokers hire sales managers and/or coordinators to help generate new business and complete the transactions.

The Broker & Salesperson Relationship

A licensed broker employs licensed salespeople to conduct real estate business. The broker is the agent of the buyer or seller, whereas a salesperson (also known as sales associate or associate licensee) is employed and is the agent of a broker. As you may recall, an agent is someone who represents a principal in negotiating with a third party.


Review - Agency Relationships

Agent Principal Third Party

(Broker) (Client) (Customer)

Listing Agent Seller Buyer

Buyers Agent Buyer Seller

Selling Agent Seller or Buyer Buyer or Seller

In a broker-salesperson relationship, the licensed salesperson is the agent of his or her employing broker (principal) and must deal fairly with third parties (brokers clients). The real estate salesperson employed by the broker is an agent for the broker. The broker bears the final responsibility for any agency relationships created by a salesperson in the brokers employ.

Example: Dan is a salesperson in the employ of broker Rosa. Dan listed a property owned by Kim. Under the law, the agency relationship is between Kim, the seller and Rosa, the broker. Dan is bound by the agency because, as Rosas employee, he represents Rosa with every action he makes as a real estate salesperson.

Review - Real Estate Broker

Person holding a broker license and permitted by law to employ those holding either a salesperson or a broker license

Agent of the principal - may negotiate for other people

Acts as an independent contractor for income tax, workers compensation, and unemployment insurance purposes

Review - Real Estate Salesperson

Person holding a salesperson license and employed by a real estate broker, for pay, to perform real estate activities

Agent of the brokernot the buyer or the seller

Employed by the broker, under real estate license law

Acts as an independent contractor for income tax purposes

The real estate license law considers a licensed salesperson an employee of a broker for purposes of supervision. An employee is someone who is under the control and direction of an employer. For all other purposes, he or she is an independent contractor: a person who is hired to do work for another person but who is not an employee of that person. Independent contractors are responsible for the results of their labor, unlike employees who must follow employers directions in completing the work.



The broker-salesperson relationship is viewed in this manner only by the license law, not by other agencies. A salespersons status under one law does not establish what that status is under different circumstances, such as federal and state income tax, workers compensation, unemployment insurance, or other matters not covered by the real estate law. Except for purposes of supervision under the license law, a salesperson is an independent contractor.

Determining Independent Contractor Status

Three basic requirements are used to determine independent contractor status, and must comply with both federal and state laws.

1. The first requirement is that the salesperson must have a valid real estate license. In California, the California Department of Real Estate must issue the license.

2. Next, the salesperson must be compensated based on the number of sales closed and commissions earned, not based on the number of hours worked.

3. Finally, for both federal and California tax purposes, there must be a written contract between the employing broker and the salesperson specifying that the salesperson is an independent contractor. Fortunately, the same contract can cover both federal and California requirements.

A broker can create and use his or her own employment contract; however, be advised that the C.A.R. Broker-Associate Licensee Contract contains the required language. When the employment agreement has the correct language, a real estate salesperson is an independent contractor for income tax purposes; therefore, tax is generally not taken out of the commission check.

Employment Agreement

The real estate law requires that every broker have a written employment agreement with each of his or her salespeople. Although the employment agreement does not have to be on a form approved by the Commissioner, it must cover the important aspects of the employment relationship, including supervision of licensed activities, licensees duties, and the compensation arrangement. Additionally, in order to protect the independent contractor status of the salespeople, the contract must include the required language as discussed in the previous two paragraphs.


Both parties must sign and date the agreement and if employment is terminated, the broker must keep copies of it for three years after the date of termination. A salesperson may receive compensation from his or her employing broker and may not receive compensation or referral fees from a lender, developer, or seller.

Commissions

Commissions may be divided among several brokers and their salespeople. The broker and salesperson on each side of the transaction share their commission when the transaction closes escrow. Commissions are based on a certain percentage of the propertys sale price. The amount is not set by law, and must be decided between the broker and seller.

At the transaction closing, the seller is debited the amount he or she has agreed to pay the listing broker as commission on the sale. The escrow officer divides the amount between the listing broker and the selling broker, according to the commission split agreement between the brokers. Each broker then splits his or her share with the listing salesperson or selling salesperson. The escrow office never pays a commission directly to a salesperson. Salespeople may receive their commissions only from their employing brokers.

Commission Split Your commission split will be a certain percentage of the commission that comes to the brokerage from your sales. The percentage is based on the commission split agreement you have with your broker as written in the employment agreement. The rate of commission varies according to broker and salesperson agreement, the type of property, and its value. Although a salespersons share varies greatly from firm to firm, a beginning salespersons split usually is 50% of the total amount received by the broker. That means that the broker gets 50% and you get 50% of the commission on any sale you make. For example, if the agreed-upon commission split is 50% and the commission paid to the brokerage by the seller on one of your sales was $15,000, the broker gets $7,500 and you get $7,500. As a salesperson gains more experience and develops a clientele, it is common to negotiate a higher commission rate.


Example: Calculating Commissions

A home sold for $200,000 with a 6% commission paid by the seller. Best Real Estate Company was the listing broker and Better Realty was the selling broker. Individual salespeople for each company were on a 60-40 split with their brokers.

1. First calculate the total commission paid by the seller.

$200,000 (selling price) x 6% (rate) = $12,000 (commission)

2. Calculate the amount of each brokers commission. They have a 50/50 split: each broker

will get $6,000 ($12,000 2).

3. Finally, calculate the amount each salesperson will receive. Each salesperson has a 60/40 split with their broker. The broker will keep 60% of their $6,000 which is $3,600 ($6,000 x .60) and will pay their salesperson 40% of the $6,000 earned by the company. Each

salesperson will receive $2,400 ($6,000 x .40) from his or her broker.

Most brokerages that offer a higher commission split upfront do not provide as many services, such as training, to their salespeople. Remember, the more support the brokerage provides to you as a new salesperson, the more opportunities you will have to become a successful salesperson. It is more important, as a new salesperson, to look for support and services from a brokerage rather than higher commission splits.

Commission Disputes If a commission disagreement occurs between a broker and a salesperson, the Real Estate Commissioner does not have the authority to resolve the dispute. Any commission dispute between brokers or salespeople is a civil matter, and must be resolved in court. A salesperson or broker involved in a commission dispute should contact the Labor Commissioner who will determine whether the salesperson is an independent contractor or an employee. If the salesperson is an independent contractor, the dispute settlement must take place in a court of law or through arbitration.

Income Taxes on Commissions As a real estate licensee, you receive commissions that have no taxes deducted. Your income will be reported to the IRS on a form called the 1099-misc. form. This 1099 form is used because all of the money you earn is paid on an untaxed basis. You are responsible for filing the proper forms and paying any federal and state income taxes you owe. By January 30th, your brokerage firm will send you a 1099 form showing your total earnings for the prior year. If you have never filed your federal and state income taxes with the 1099 form, it is a good idea to get help from a tax professional or accountant.


Who Pays for Workers Compensation Insurance

As you have learned, for federal and state income tax purposes, salespeople (salespeople and broker associates) are independent contractors. However, due to their employee status, a broker must provide workers compensation insurance to all salespeople as well as any non-licensee employees of the firm. The Employment Development Department enforces compliance with workers compensation insurance requirements. Failure to provide workers compensation coverage for their real estate salespeople could result in fines up to $100,000.

Sales Managers

Sales managers are responsible for hiring and motivating the sales team. They work directly with the broker/owner to create training programs and to develop marketing strategies. An understanding of the real estate brokerage business from prospecting through closing is essential for a sales manager. Sales managers work closely with coordinators (if any) to ensure that transactions close as quickly and smoothly as possible.

Brokerage Coordinators

Salespeople are responsible for coordinating all of the paperwork involved in a transaction. You may be fortunate enough to find a brokerage that employs coordinators for several specialized areas to help their salespeople. These specialized areas include advertising, transactions, and prospecting. Coordinators keep the files of each transaction or listing current and active.

The entire team benefits from the efforts of coordinators who become the authority in their specialized subject. Each team member relies on the coordinators to maintain the framework that supports the income-generating activities of the salespeople as they work with buyers and sellers. Coordinators are usually salaried and may receive a small percentage of the teams commission income.

Advertising Coordinator

Advertising is an essential ingredient for the success of any business. The advertising coordinator for a team makes sure every listing gets its share of advertising time and creates flyers and brochures for team listings. Advertising coordinators might post new listings on the Internet and MLS or in various print media such as glossy magazines or in newspaper ads. An advertising coordinator must be creative as well as technically skilled and have the ability to promote the goals of the team.


Transaction Coordinator

Many brokerage firms employ a transaction coordinator to whom salespeople give the paperwork for a transaction just after a buyer and seller sign the offer to purchase. The transaction coordinator must be organized and manage information effectively. The success of the brokerage, as well as the income of the salesperson, lies in the capable hands of this person. He or she has the qualities and skills that lead each transaction to a successful and timely close.

Not all brokerage firms employ transaction coordinators, but having someone to help with the details of a transaction will provide salespeople more time to pursue new business. A transaction coordinator may be paid a salary by the brokerage, and then paid independently by the salespeople, or be strictly an independent contractor dealing directly with the salespeople. The charge to the salesperson is usually $250 to $500 per transaction, depending on the coordinator.

Listing Coordinator

The listing coordinator manages all required paperwork for listings. Duties may include preparing a pre-listing package and competitive market analysis (CMA) for each seller, communicating with sellers regarding the marketing of their property, following-up with salespeople who show the property, arranging office and MLS previews, and completing any task required to take the listing from potential sale to closed transaction.

Listing coordinators may also be asked to put up and remove signs, install lock boxes, and deliver flyers and documents to help balance the jobs of other team members.

Escrow Coordinator

When a seller accepts an offer, the salesperson or the listing coordinator gives the file to the escrow coordinator who guides the transaction through to closing. The escrow coordinator manages all earnest money deposits, inspections, disclosures, financing, title, and escrow issues. During the escrow process, anything that needs to be resolved prior to closing is the responsibility of the escrow coordinator. This may include the buyers approval of the property inspection, pest control inspection, geological report and other disclosures required by law or by agreement of the buyer and seller.

Prospecting Coordinator

Salespeople tend to put off prospecting for new business. The primary responsibility of a prospecting coordinator is to be on the telephone seeking


new business at least six hours a day, to generate leads and set up appointments for the lead listing salesperson. The task of creating new leads day in and day out can be a challenge for any salesperson and it takes a special attitude to perform this job. The coordinator may organize a wide range of prospecting activities, such as door-knocking campaigns, e-mail communication with prospects, contacting For-Sale-By-Owners (FSBOs), contacting expired listings, arranging holiday giveaways, or open house contacts.

SUMMARY

A career in real estate allows licensed real estate salespeople to help consumers realize their dreams. Buyers and sellers rely on the salesperson to provide the knowledge that will guide them through the complex world of real estate sales.

Several advantages of pursuing a career in the real estate profession include high earning potential, independence, and a flexible work schedule.

Beginning a real estate career is different for all individuals depending on their work experience. However, everyone must obtain the licensing and education necessary to enter the field. Achieving success in this highly competitive field is possible for those who are willing to work hard.

A real estate salesperson who specializes in residential sales prospect, preview properties, obtain listings, work with buyers, handle paperwork, and attend meetings. Brokers and salespeople often work evenings and weekends, and are always on call to suit the needs of clients.

The interview process is an opportunity for the newly licensed salesperson to select a brokerage that meets his or her needs regarding training, commissions, and flexibility.

The purpose of a real estate brokerage is to help people buy and sell real property. A brokerage firm includes a licensed real estate broker who may work alone or with the help of as many as several hundred licensed real estate sales associates. A real estate brokerage is primarily concerned with securing listings, finding buyers, and closing transactions.

Some brokerages have coordinators and mentoring programs. Coordinators provide services to their agents in areas such as listing, escrow, prospecting, advertising, and transaction coordination. New salespeople are helped by mentors who guide the inexperienced salesperson through the first few transactions.


UNIT 1 REVIEW

Matching Exercise Instructions: Write the letter of the matching term on the blank line before its definition. Answers are in Appendix A.

Terms A. appraiser N. mentor

B. advertising coordinator O. Multiple Listing Service (MLS)

C. broker-owner P. offer to purchase

D. commission Q. property management

E. counteroffer R. prospecting

F. escrow coordinator S. prospecting coordinator

G. earning potential T. Real Estate Professional Assistantsm

(REPA) H. franchise U. third party I. independent contractor V. transaction sides J. independent firms W. transaction coordinator K. job outlook X. working smarter L. listing agreement

M. listing coordinator

Definitions

1. ________ A person who guides a trainee through the first few months or transactions as a salesperson

2. ________ The operation and maintenance of rental properties

3. ________ A person who estimates property value

4. ________ The act of seeking out potential clients

5. ________ A contract between the property owner and the broker to place properties for sale with the brokerage

6. ________ The proposal made by a potential buyer to an owner of property to purchase the property under stated terms


7. ________ The rejection of an original purchase and the submission of a new and different offer

8. ________ A cooperative listing service conducted by a group of brokers, usually members of a real estate association

9. ________ A person who chooses the method to use in completing the work under contract, and is accountable for the results

10. _______ The main source of earnings for real estate salespeople and brokers based on a certain percentage of the propertys sales price

11. _______ Buyer and seller sides to a transaction

12. _______ A comprehensive two-day certificate course that introduces the real estate business and the specific ways support staff can become valuable assets to their employers

13. _______ A broker who creates a firm and sets all the policies of the firm

14. _______ A national real estate company that generally offers the greatest opportunity for training

15. _______ The customer in an agency relationship

16. _______ A brokerage worker who manages all required paperwork for listings

17. _______ A brokerage worker who guides the transaction through to closing and manages all earnest money deposits, inspections, disclosures, financing, title, and escrow issues

18. _______ A brokerage worker who seeks new business to generate leads and set up appointments for the lead listing salesperson

19. _______ A brokerage worker who makes sure every listing gets its share of ad time as well as making up flyers and brochures for team listings

20. _______ Brokerage worker to whom salespeople give the paperwork for a transaction just after a buyer and seller sign the offer to purchase


Multiple Choice Questions Instructions: Circle your response and go to Appendix A to read the complete explanation for each question.

1. Why do people go into real estate sales?

a. High earning potential b. Independence c. Flexible schedule d. All of the above

2. Real estate salespeople are paid when:

a. they obtain a listing. b. one of their transactions closes. c. the broker receives the earnest money deposits from the buyer. d. the buyer and seller open escrow.

3. The main source of earnings for real estate salespeople and brokers are:

a. referral fees. b. commissions. c. desk fees. d. salaries.

4. Who determines the amount of commission a broker receives?

a. The broker and the seller b. The broker and the buyer c. The Real Estate Commissioner d. The National Association of REALTORS

5. Someone who is under the control and direction of an employer is:

a. an independent contractor. b. a broker. c. an employee. d. none of the above

6. An activity involving the sale of something through an intermediary who negotiates the transaction for payment is a:

a. brokerage. b. listing. c. deposit. d. funding.


7. A listing agreement is an employment contract between a seller and a:

a. prospecting coordinator. b. buyer. c. broker. d. salesperson.

8. Prospecting for listings and selling properties are the main activities of:

a. sellers. b. salespeople. c. real estate assistants. d. transaction coordinators.

9. Preparing CMAs and arranging office previews might be performed by the:

a. listing coordinator. b. escrow coordinator. c. property coordinator. d. property manager.

10. The coordinator is responsible for paperwork regarding property inspections while the transaction is in escrow.

a. listing b. escrow c. appraisal d. disclosure

CHAPTER 2: PREPARE FOR SUCCESS

INTRODUCTION

As you enter the real estate profession, you may wonder what it takes to become successful. Just knowing enough to pass the state licensing exam is not enough. Many successful California Association of REALTORS members attribute their success to determination, good training, and mentoring. Of course, as a new real estate salesperson, success is not possible without the financial reserves to keep you going until you develop a steady commission stream.

The competitive nature of the real estate profession can be the invisible deal breaker for those who are surprised to find that they are not the only optimistic sales associate in their area trying to list or sell a house. New sales associates must be willing to work longer hours. In fact, NAR statistics show that a majority of new members work more than 40 hours per week. Competition is part of the career, and willingness to seek out a challenge is basic to the real estate sales associate. The accomplishment of becoming a successful real estate professional is only achieved by the sales associate who acquires a competitive edge and learns to prevail in a demanding profession.

California Real Estate Practice, 4th Edition 35


Learning Objectives After reading this unit, you should be able to:

identify the various costs and expenses in starting a real estate sales career.

identify the start-up equipment needed to begin a real estate sales career.

describe the personal attributes and factors that help real estate licensees become successful.

list steps to improve your communication skills.

PREPARE YOUR FINANCES

Many new salespeople leave the real estate business within the first year. Some put their licenses on inactive status, whereas others leave the field completely. Why isnt the success rate higher for new salespeople? The main reason is not being prepared. Frequently new salespeople think selling real estate is easy money and end up turning in their licenses once they find out the difficulty and competitiveness of the profession.

Salespeople who make it in this business have determination, financial staying power, and product knowledge. They know how to manage their time, market themselves, and advertise their services and listings.

What Do You Expect to Earn? Based on the sales price of homes in California, most new agents expect to earn several thousand dollars in their first year. Although it is not impossible, it is highly unlikely. Since it takes a while to build your business and establish yourself, new salespeople do not earn as much as salespeople with years of experience.

Income usually increases as an agent gains experience. According to the 2012 NAR Member Profile, the nationwide median income for REALTORS

with over 15 years of experience is $50,200. Median income is the middle income in a series of incomes ranked from lowest to highest.

As you can see from the following chart, the most recent median income for salespeople nationwide was $27,200. To calculate their pre-tax net income, subtract the $4,520 in annual business expenses. After expenses, the median income for salespeople was $22,680 or $2,268 for each transaction side.

Unit 2: Prepare for Success 37

Prole of NAR Members

Year 2009 2010 2011 Number of NAR Members 1,128,895 1,088,919 1,024,669

Number of hours worked per week 40 40 40

Median income (broker & salesperson) $35,700 $34,100 $34,900

Median salesperson income $26,600 $24,900 $27,200

Median broker income $49,100 $48,700 $48,400

Number of transaction sides per year 7 8 10

Residential brokerage 80% 79% 80%

Regularly use email with clients 93% 92% 93%

Have personal websites 60% 62% 66%

Annual business expenses $5,480 $4,270 $4,520

Percentage of independent contractors 81% 82% 81%

Length of time with a rm 5 years 5 years 6 years

The first few years in real estate sales are financially challenging. However, REALTORS who have been in the business for a long time have only one regretthey did not start sooner.

Get Your Finances in Order Sales associates need to have sufficient cash reserves set aside before making even one sale. It can take six months or longer before your real estate career will provide financial support for you and your family. Before starting your sales career, get your finances in order. Write a monthly household budget for your household expenses. Be as conservative as possible. It is vital to your success that you have savings or other resources to maintain your household expenses while your real estate business is growing. Any strain on your personal budget will put the financial success of your new career at risk.

You will also need money to purchase the necessary equipment and supplies to start your new real estate career. Essentially, as a real estate salesperson, you are


starting your own business. It is important to be aware of the expenses involved in starting and maintaining a real estate business. Starting a business is costly, especially when it comes to equipment, supplies, marketing, and advertising. Owners do not make any money until a transaction is complete.

Until your income is steady, anticipate business expenses to be a frequent drain on your financial resources. The first year is critical for new salespeople, and because of these unanticipated expenses, many do not make it to the second year.

To determine how much money you will need, identify all of the business costs and expenses you can expect to incur as a real estate salesperson. Decide which are essential or optional; then estimate what it will cost each month for the first several months. Some of these expenses will be one-time costs (start-up costs) such as computer equipment. Others are ongoing expenses that recur every month like your cell phone bill, car maintenance, postage, printing, advertising, and insurance premiums.

A realistic start-up budget should only include those things that are necessary to get started. When business picks up, you can always add the optional items on your list. Expect to incur the following expenses when starting your career in real estate:

List of Items Needed to Start a Career in Real Estate

Start-Up Costs Ongoing Expenses

Basic equipment (cell phone, Cell phone bill computer, fax, GPS) Car maintenance

Lockbox key Internet and email account Business cards Printing costs Letterhead & envelopes Advertising Preprinted forms Automobile insurance Business supplies (maps, pens, Photos

paper, etc.) Postage Open house supplies Association dues & MLS fees Marketing materials Coordinator fees Presentation materials E&O & liability insurance Signs and sign riders Continuing education

License renewal


Get Your License and Join the Board Your first expense after passing the state exam will be to pay for your salesperson license, which you must have before you can work in a brokerage.

Next, you will probably pay the fees to join the local Association of REALTORS. This includes membership in the California Association of REALTORS

(C.A.R.) and the National Association of REALTORS (NAR). As a member, you will be able to access the free ZipForm software or go to the local board office and purchase the standard printed forms and other supplies you may need. ZipForm is a free software program that allows members to download, complete, and print transaction forms from their computers.

Membership in the local association also includes access to the Multiple Listing Service (MLS). In order to show properties listed in the MLS you will need a lockbox key. The lockbox is a box that holds the key to a listed property and is hung on or near the front door of the property. Only licensees who are members of the local real estate boards have the key or combination to open the lockbox and get the property key.

Lockboxes are either mechanical or electronic. Electronic lockboxes use a special electronic key to open them. The electronic lockbox key looks like a small remote and can be updated by placing it in the special HotSync cradle. There is a charge for the key, and depending on the board it is paid monthly, quarterly, or annually. Since each broker and salesperson is issued an individual key code, electronic lockboxes record who has opened them, the date and time opened, and the office and phone number. In addition, listing agents have an audit trail so if anything is missing or damaged they will know who has entered the home.

Get the Necessary Equipment Investing in technology is crucial to remain competitive in todays real estate profession. Consumers today require better service and more value from real estate professionals than in the past. In addition to traditional skills, a competitive associate must use technology effectively. While friendliness, style, and a quick wit are assets, in order to compete in the real estate market today, a professional must use the computer and communication devices currently available.

Technology provides countless benefits and conveniences to real estate salespeople; however, the vast number of products available that promise to make our lives easier can be overwhelming. How do you figure out which


products will be of most use to you? Before investing in the latest gadgets, do a little research and consider your needs. Find out what brands are available and which have the best reviews based upon consumer use. The following sections provide information on the latest products used by real estate professionals today.

Smartphones

Communication is the lifeblood of real estate sales, and the smart cell phone is your primary point of contact. In fact, smartphones are almost pocket computers. It is nearly impossible to imagine a real estate agent without a cell phone.

The latest smartphones have multiple features which you may want to consider when selecting your phone:

Bluetooth Technology Since your car is your second office, a phone with Bluetooth connectivity and a Bluetooth enabled headset allows you to drive and speak simultaneously.

Email An email feature will help you stay connected to your office and clients. Most smartphones have a keyboard or use touch screen technology to send text messages or emails.

Internet Access Access to the Internet is great for quick searches or accessing your companys website.

Apps Apps are small, downloadable programs developed primarily for smartphones. There are hundreds of useful apps designed for real estate professionals to help increase productivity.

Camera A camera is a practical option on your smartphone. Quickly snap a photo and email it to a client.

GPS If you do not have a Global Positioning System (GPS) navigation system, consider a phone with this feature.

Computer System

Real estate salespeople need a computer system with the appropriate software and Internet access to succeed. Real estate sales associates are able to stay in contact with clients, access current MLS data, download zipForm, and create presentations. Your brokerage may or may not provide a computer and its essential components for sales associates to use.


If you do not already have a computer, consider a notebook computer because its small, thin design allows for increased portability. Consider a WiFi (wireless fidelity) model, in order to access the Internet wirelessly while on the road. Many airports, hotels, restaurants, and other businesses offer public access, called hotspots, to WiFi networks so people can log onto the Internet.

Contact Management Software

Today, contact management is essential for effective listing, selling, and marketing. Contact management software is a database program that allows you to manage and track all your client information and activities, including names, phone numbers, addresses, websites, email addresses, last meeting dates, and more.

You can choose from generic off-the-shelf programs, real estate productivity programs, or a hybrid that adds real estate features to an existing generic program.

Generic Programs Several generic programs such as Microsoft Outlook, Act!, GoldMine, and AnyTime Organizer are available from retail stores. These all give you the latest features in contact management, but you will need to spend some time adapting them to the real estate business.

Real Estate Productivity Software Contact management software that is specifically designed for real estate has predefined fields relevant to real estate listing and sales activities. The built-in real estate letters, emails, flyers, and brochures make marketing tasks easy. Some of the well-known real estate productivity programs used by real estate professionals include Top Producer, RealFuture Solutions, AgentOffice, and Maximizer.

Real estate sales associates are able to work from an ofce, automobile, hotel room, or a sellers home. A laptop computer is versatile and convenient for real

estate professionals.


Hybrid Software Solutions The third option is software add-ons such as Trans/ACT! for Residential Real Estate and ACTiveAgent. These allow you to customize programs such as ACT! or Microsoft Outlook for real estate special needs. Both ACTive Agent and Trans/ACT! for Residential Real Estate are used with ACT!

software. Real Estate Management System is a software add-on used with Microsoft Outlook.

Be Internet Savvy

To be competitive in this market, you must be competent in using the Internet. Most buyers and sellers use the Internet to search for property. Once the Internet homebuyer has researched the neighborhood and price range of homes, he or she is ready to look at the actual homes. In fact, many homebuyers found a sales associate to represent them on the Internet. The average Internet homebuyer looks at six houses and takes only two weeks to purchase, compared to traditional real estate buyers who look at multiple houses and take weeks to purchase.

Most prospective sellers and Internet homebuyers will not even consider hiring you if you do not have Internet access. Therefore, if you do not already have regular access to the Internet and your brokerage does not provide an account for its sales associates, you will need to pay for an account. You will need Internet access so you can have an email address and maybe even your own website.

Websites Websites are essential for businesses to stay competitive with other companies. A website is the place (address) an individual or company has on the World Wide Web. Your brokerage company will have a website, but you may want to have your own personal website as well. With your own website, you will announce that you are a consumer-oriented, technologically informed sales associate. In addition, you can make marketing your name a top priority by choosing the domain name to be your own name. Then your email address will be even more personalized.

Example: Susan Sails, who works for one of the large, national franchises, wants to market herself and create a stronger image in the community. She decides to create her own website using www.SuzySellsRealEstate.com as the domain name. To personalize her image further, her email address could be [email protected]. Since she owns the domain name, re-gardless of which brokerage company she works for, her name, telephone number, and email address follow her wherever she goes.


A well-designed website focuses on the needs of its readers. It should provide all the data a consumer might seek such as information about financing, home inspectors, community and school statistics, moving information, a local map, and property profiles. Site visitors will quickly learn that you are an informed real estate professional who will provide the products and services they desire.

A mailed marketing piece should direct prospects to your website. While there, they can select their preferred method of communication and let you know if they are interested in buying, selling, or refinancing. You could list addresses and telephone numbers of local services such as dry cleaners, veterinarians, athletic clubs, and pre-schools. The information you provide on your website is dependent on the demographics of your target audience.

Your website should also include your qualifications and contact information. It should reflect your professional image: a photo, your resume, a logo, and the services you will provide. In addition, customer testimonials are a good way for prospects to learn more about you and the level of service you will provide. All the information you provide should allow a visitor to navigate your website easily. Studies show that Internet real estate leads are an excellent source of real estate leads overall, second only to For Sale signs.

Presentation Hardware

Be sure your computer system has a DVD (digital videodisc) drive. With this feature, you will be able to create presentations with video, graphics, and photographs for websites or simply for potential clients. Software such as Microsoft PowerPoint will allow you to display graphics, charts, and tables in these presentations.

Mobile Printer

With a mobile printer, you can be the true road warrior and have the convenience of printing right from your laptop. Mobile printers are convenient for printing contracts, CMAs, and even color photos.

Digital Cameras

Digital cameras are affordable, user-friendly, and compact. A digital camera provides numerous avenues for increasing your productivity, such as emailing photos to clients, or adding photos to your website and brochures. A competitive sales associate will use photos to win over reluctant prospects,


whether buyers or sellers, by showing instead of telling them what they want to know. Remember, A picture is worth a thousand words.

Global Positioning System ( GPS)

A global positioning system (GPS) is a device that uses satellite technology to track your location and map

out driving directions to a desired

destination. GPS and/or navigation systems are nice options for people who spend much of their professional lives on the road. Options range

from handheld to built-in models in your automobiles dashboard. Many models available are voice activated

which allow you to keep your eyes on the road.

Risk Management In order to minimize risk and help protect themselves in the event of a lawsuit, real estate sales associates must carefully document every event

A GPS will track your location andin a transaction. For example, be map out driving directions to your sure to have the seller sign a waiver desired location. if the seller declines the purchase of a home warranty on behalf of the buyer. If a termite inspection is required, make sure to give the seller a list of good companies. Do not recommend a specific company. This avoids being at fault if the seller feels injured by the report. If a seller and buyer agree to skip a termite inspection, refuse to complete recommended repairs or seek pest control, the sales associate should have both parties sign a disclaimer stating it was their decision to decline having the work done.

Automobile Insurance

As a real estate salesperson, part of your time will be spent driving clients around to show them properties. Your personal auto policy should be sufficient; however, you may want to increase your liability coverage. If you cause an accident, the injured parties can go after your personal and business assets. Higher liability limits are recommended in order to minimize risk.

The old way

The modern way


Errors and Omissions Insurance

Claims against real estate brokerage firms have been on the rise for at least the last 15 years. Some claimants consider the deep pockets of large real estate companies to be the obvious choice for a lawsuit. As part of ongoing risk management, brokerage firms purchase errors and omissions insurance. Errors and omissions insurance (E&O) is a policy that covers various claims for errors, mistakes, neglect, or carelessness in the normal business activities of a real estate brokerage.

Each brokerage has different requirements for errors and omissions insurance. Some companies charge sales associates by the transaction, taking a certain percentage out of each commission check at the close of escrow. Others require sales associates to pay the insurance premiums as an annual payment or as monthly installments. The amount companies charge associates may vary due to the amount of the deductible. Sales associates who only do a few transactions a year prefer the per-transaction method, while busier sales associates like the annual fee. Either way, as a licensee, you will be required to purchase E&O insurance to protect yourself against possible lawsuits.

Many times, an easily solved problem becomes an enormous crisis and the only solution seems to be a lawsuit. The reason could stem from a variety of issues such as poor brokerage management, a poorly trained sales associate, or lack of disclosure.

PUT YOUR BEST FOOT FORWARD The first impression you make is very important to the success or failure of your real estate career. How prospective clients perceive you could mean the difference between making a sale and needing a new line of work. Real estate knowledge and customer service may be what matters most when concluding a successful sale, but an excellent first impression, professional appearance, and positive attitude are initially what gets you through the door.

Professional Appearance It is important to be aware of your personal appearance. You only have one chance to make a good first impression. The way you dress and present yourself is a powerful business tool. If you were interested in buying or selling property, would you prefer a salesperson wearing freshly pressed, clean clothes or someone wearing old jeans, running shoes, and a wrinkled T-shirt? Usually, the salesperson wearing the clean, freshly pressed clothing and clean shoes appears more professional and makes the best impression.


Dress for Success

The image you present helps you build rapport with prospective clients. When connecting with a client, if you remind them of someone they like or mirror their own taste, they are more likely to respond to you positively.

These styles of dressing are not recommended if you want a successful career.


When considering how to dress, the best strategy is to mirror the style of your clients. If you are selling million dollar homes to older buyers, dress conservatively in a suit. If you were selling starter homes to new families, a suit might be overdressing, and perhaps intimidating. What is most appropriate to wear depends on the age and income of your clients and whether they are urban, suburban, or rural.

Employees who dress appropriately leave a lasting impression of professionalism.


Wardrobe Tips When choosing an outfit, avoid anything that is too flashy or provocative. Some salespeople strive for the business casual look. This can be a bit confusing because everyone defines it differently. In general, business casual for men means a jacket or a sports coat without a tie. For women, it means sweater sets with pants or skirts. It does not mean a sweat suit, denim jeans, and running shoes.

Buy a wardrobe that is flexible and easy to take care of so you will not have to spend time and money on wardrobe upkeep. Buy good quality fabrics that will last. Linen, silk, and some synthetics can look tired in a hurry. Be sure jackets have pockets to hold keys and business cards. Choose friendly, approachable colorsbrowns, blues, burgundies, and olives. If you wear black, try mixing it with a softer color.

Keep accessories and jewelry simple and useful. Avoid wearing strong colognes or perfumes because certain scents may trigger allergies.

Your Vehicle

A clean and tidy environment, whether it is your office, home, or car shows that you are organized and that you care about yourself as well as others. In addition to your personal appearance, your vehicle is another important part of your image as a real estate professional.

You will be responsible

for driving clients to locations to show them properties. Keep your

vehicle neat, clean, and

free from unpleasant odors caused by food, cigarettes,

pets, and strong perfumes or colognes. Files, signs, and all personal items

should be kept in the trunk. Remember to have your vehicle washed and serviced regularly.

Your vehicle should be well-maintained and clean. It should not look like this.


Professional Attitude Professional appearance often refers only to the physical, but the mental picture you project to prospective clients is equally important. Your attitude has an effect on your overall image. When you have a good attitude and are confident, you appear trustworthy and reliable. As a real estate salesperson, it is especially important to be trustworthy because people will feel more comfortable working with and depending on you.

You must always project a positive, professional attitude regardless of the circumstances. Everyone has good and bad days; however, real estate sales associates have to smile every day, no matter what is going on in their personal lives. The moment you allow your personal feelings to influence how you interact with clients, your undisciplined behavior will suggest an unprofessional sales

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